By Clemens Susen, Investment Manager, aream Group

Private equity and venture capital investors have a special responsibility in view of the current ecological and also economic developments: The capital allocation as well as the long-term investment approach and active participation style of these investors ultimately have a direct impact on companies and thus also on the adaptation of ESG guidelines (Environmental, Social, Governance).

In addition, investors should also have a vested interest in implementing ESG guidelines, as sustainable management is being promoted and increasingly required by regulations. Although ESG criteria are non-financial, non-compliance also often has an impact on the value of investments. Investors in private equity and venture capital funds should also take a strong interest in ESG compliance. In addition to the economic impact, a massive disregard of ESG guidelines can result in a considerable reputational risk for them.
 

Nevertheless, many capital providers and investors still only apply a negative selection process. As a result, although the black sheep are screened out, companies that operate in a particularly sustainable manner are not specifically promoted as winners of tomorrow's world. This creates opportunities for investors to actively address the ESG criteria in the selection process and to insist that the target com-panies comply with them. This topic is not always at the forefront of start-ups. With further growth, however, these criteria play an increasingly important role in future company valuations.
 

Meanwhile, there are numerous opportunities to invest in companies that operate sustainably and thus conform to ESG. Those who invest their money now in so-called Cleantech companies can generate good profits due to the "early adopter" advantage and at the same time invest in a future-oriented and sustainable manner.